ORGANIZATIONAL TRANSFORMATION

Defined


Transformation, according to Webster’s Dictionary, is: ’A change in the shape, structure, nature of something‘. Organizational transformation is the process of ensuring that an organization can develop and implement major change programmes that will ensure that it responds strategically to new demands and continues to function effectively in the dynamic environment in which it operates. Organizational transformation activities may involve radical changes to the structure, culture and processes of the organization – the way it looks at the world. This may be in response to competitive pressures, mergers, acquisitions, investments, disinvestments, changes in technology, product lines, markets, cost reduction exercises and decisions to downsize or outsource work. Transformational change may be forced on an organization by investors or government decisions. It may be initiated by a new chief executive and top management team with a remit to ‘turn round’ the business.

Transformational change means that significant and far-reaching developments are planned and implemented in corporate structures and organization-wide processes. The change is neither incremental (bit by bit) nor transactional (concerned solely with systems and procedures). Transactional change, according to Pascale (1990), is merely concerned with the alteration of ways in which the organization does business and people interact with one another on a day-to-day basis, and ‘is effective when what you want is more of what you’ve already got’. He advocates a ‘discontinuous improvement in capability’ and this he describes as transformation.


The distinction between organizational transformation and organization development


Organizational transformation programmes are business-led. They focus on what needs to be done to ensure that the business performs more effectively in adding value, especially for its owners, and achieving competitive advantage. They will be concerned with building strategic capability and improving the ways in which the business reaches its goals. This means considering what needs to be done to ensure that people work and interact well, but they are not dominated by the concepts of behavioural science, as was the case in traditional OD interventions.

Beer, Eisenstat and Spector

Michael Beer (1990) and his colleagues suggested in a seminal Harvard Business Review article, ‘Why change programs don’t produce change’, that most such programmes are guided by a theory of change that is fundamentally flawed. This theory states that changes in attitudes lead to changes in behaviour. ‘According to this model, change is like a conversion experience. Once people “get religion”, changes in their behaviour will surely follow.’ They believe that this theory gets the change process exactly backwards.


In fact, individual behaviour is powerfully shaped by the organizational roles people play. The most effective way to change behaviour, therefore, is to put people into a new organizational context, which imposes new roles, responsibilities and relationships on them. This creates a situation that in a sense ’forces‘ new attitudes and behaviour on people.


They prescribe six steps to effective change, which concentrate on what they call ‘task alignment’ – reorganizing employees’ roles, responsibilities and relationships to solve specific business problems in small units where goals and tasks can be clearly defined. The aim of following the overlapping steps is to build a self-reinforcing cycle of commitment, coordination and competence. The steps are.


1. Mobilize commitment to change through the joint analysis of problems.


2. Develop a shared vision of how to organize and manage to achieve goals such as competitiveness.


3. Foster consensus for the new vision, competence to enact it, and cohesion to move it along.


4. Spread revitalization to all departments without pushing it from the top – don’t force the issue, let each department find its own way to the new organization.


5. Institutionalize revitalization through formal policies, systems and structures. 6. Monitor and adjust strategies in response to problems in the revitalization process.

Thurley

● Directive – the imposition of change in crisis situations or when other methods have failed. This is done by the exercise of managerial power without consultation.


● Bargained – this approach recognizes that power is shared between the employer and the employed and that change requires negotiation, compromise and agreement before being implemented.


● ‘Hearts and minds’ – an all-embracing thrust to change the attitudes, values and beliefs of the whole workforce. This ‘normative’ approach (ie one that starts from a definition of what management thinks is right or ‘normal’) seeks ‘commitment’ and ‘shared vision’ but does not necessarily include involvement or participation.


● Analytical – a theoretical approach to the change process using models of change such as those described above. It proceeds sequentially from the analysis and diagnosis of the situation, through the setting of objectives, the design of the change process, the evaluation of the results and, finally, the determination of the objectives for the next stage in the change process. This is the rational and logical approach much favoured by consultants – external and internal. But change seldom proceeds as smoothly as this model would suggest. Emotions, power politics and external pressures mean that the rational approach, although it might be the right way to start, is difficult to sustain.


● Action-based – this recognizes that the way managers behave in practice bears little resemblance to the analytical, theoretical model. The distinction between managerial thought and managerial action blurs in practice to the point of invisibility. What managers think is what they do. Real life therefore often results in a ‘ready, aim, fire’ approach to change management. This typical approach to change starts with a broad belief that some sort of problem exists, although it may not be well defined. The identification of possible solutions, often on a trial and error basis, leads to a clarification of the nature of the problem and a shared understanding of a possible optimal solution, or at least a framework within which solutions can be discovered.

Overcoming Resistance to Change

Resistance to change can be difficult to overcome even when it is not detrimental to those concerned. But the attempt must be made. The first step is to analyse the potential impact of change by considering how it will affect people in their jobs. The analysis should indicate which aspects of the proposed change may be supported generally or by specified individuals and which aspects may be resisted. So far as possible, the potentially hostile or negative reactions of people should be identified, taking into account all the possible reasons for resisting change listed above. It is necessary to try to understand the likely feelings and fears of those affected so that unnecessary worries can be relieved and, as far as possible, ambiguities can be resolved. In making this analysis, the individual introducing the change, who is sometimes called the ‘change agent’, should recognize that new ideas are likely to be suspect and should make ample provision for the discussion of reactions to proposals to ensure complete understanding of them.

Involvement in the change process gives people the chance to raise and resolve their concerns and make suggestions about the form of the change and how it should be introduced. The aim is to get ‘ownership’ – a feeling amongst people that the change is something that they are happy to live with because they have been involved in its planning and introduction – it has become their change.


Communications about the proposed change should be carefully prepared and worded so that unnecessary fears are allayed. All the available channels as described in Chapter 54 should be used, but face-to-face communications direct from managers to individuals or through a team briefing system are best.

Why People Resist Change

People resist change because it is seen as a threat to familiar patterns of behaviour as well as to status and financial rewards. Joan Woodward (1968) made this point clearly.


When we talk about resistance to change we tend to imply that management is always rational in changing its direction, and that employees are stupid, emotional or irrational in not responding in the way they should. But if an individual is going to be worse off, explicitly or implicitly, when the proposed changes have been made, any resistance is entirely rational in terms of his own best interest. The interests of the organization and the individual do not always coincide.


Specifically, the main reasons for resisting change are as follows:


● The shock of the new – people are suspicious of anything which they perceive will upset their established routines, methods of working or conditions of employment. They do not want to lose the security of what is familiar to them. They may not believe statements by management that the change is for their benefit as well as that of the organization; sometimes with good reason. They may feel that management has ulterior motives and, sometimes, the louder the protestations of managements, the less they will be believed.


● Economic fears – loss of money, threats to job security.


● Inconvenience – the change will make life more difficult.


● Uncertainty – change can be worrying because of uncertainty about its likely impact.


● Symbolic fears – a small change that may affect some treasured symbol, such as a separate office or a reserved parking space, may symbolize big ones, especially when employees are uncertain about how extensive the programme of change will be.


● Threat to interpersonal relationships – anything that disrupts the customary social relationships and standards of the group will be resisted.


● Threat to status or skill – the change is perceived as reducing the status of individuals or as de-skilling them.


● Competence fears – concern about the ability to cope with new demands or to acquire new skills.


Operational change


Operational change Operational change relates to new systems, procedures, structures or technology which will have an immediate effect on working arrangements within a part of the organization. But their impact on people can be more significant than broader strategic change and they have to be handled just as carefully.

Strategic change

Strategic change is concerned with organizational transformation as described in the last section of this chapter. It deals with broad, long-term and organization-wide issues. It is about moving to a future state, which has been defined generally in terms of strategic vision and scope. It will cover the purpose and mission of the organization, its corporate philosophy on such matters as growth, quality, innovation and values concerning people, the customer needs served and the technologies employed. This overall definition leads to specifications of competitive positioning and strategic goals for achieving and maintaining competitive advantage and for product-market development. These goals are supported by policies concerning marketing, sales, manufacturing, product and process development, finance and human resource management.

Strategic change takes place within the context of the external competitive, economic and social environment, and the organization’s internal resources, capabilities, culture, structure and systems. Its successful implementation requires thorough analysis and understanding of these factors in the formulation and planning stages. The ultimate achievement of sustainable competitive advantage relies on the qualities defined by Pettigrew and Whipp (1991), namely: ‘The capacity of the firm to identify and understand the competitive forces in play and how they change over time, linked to the competence of a business to mobilize and manage the resources necessary for the chosen competitive response through time.’


Strategic change, however, should not be treated simplistically as a linear process of getting from A to B which can be planned and executed as a logical sequence of events. Pettigrew and Whipp (1991) issued the following warning based on their research into competitiveness and managing change in the motor, financial services, insurance and publishing industries:


The process by which strategic changes are made seldom moves directly through neat, successive stages of analysis, choice and implementation. Changes in the firm’s environment persistently threaten the course and logic of strategic changes: dilemma abounds… We conclude that one of the defining features of the process, in so far as management action is concerned, is ambiguity; seldom is there an easily isolated logic to strategic change. Instead, that process may derive its motive force from an amalgam of economic, personal and political imperatives. Their introduction through time requires that those responsible for managing that process make continual assessments, repeated choices and multiple adjustments.

CHANGE MANAGEMENT

Conceptually, the change process starts with an awareness of the need for change. An analysis of this situation and the factors that have created it leads to a diagnosis of their distinctive characteristics and an indication of the direction in which action needs to be taken. Possible courses of action can then be identified and evaluated and a choice made of the preferred action.

It is then necessary to decide how to get from here to there. Managing change during this transition state is a critical phase in the change process. It is here that the problems of introducing change emerge and have to be managed. These problems can include resistance to change, low stability, high levels of stress, misdirected energy, conflict and loss of momentum. Hence the need to do everything possible to anticipate reactions and likely impediments to the introduction of change.


The installation stage can also be painful. When planning change there is a tendency for people to think that it will be an entirely logical and linear process of going from A to B. It is not like that at all. As described by Pettigrew and Whipp (1991), the implementation of change is an ‘iterative, cumulative and reformulationin-use process’.


To manage change, it is first necessary to understand the types of change and why people resist change. It is important to bear in mind that while those wanting change need to be constant about ends, they have to be flexible about means. This requires them to come to an understanding of the various models of change that have been developed. In the light of an understanding of these models they will be better equipped to make use of the guidelines for change set out at the end of this section.